JetBlue adding checked bag fee in fare revamp

JetBlue Airways, in the first major makeover of its fare system, will end a free checked-bag perk but offer passengers more ticket choices starting Tuesday.

The move, being introduced as part of JetBlue’s three-tiered “Fare Options,” leaves Southwest Airlines as the only major U.S. carrier not charging for an initial piece of checked luggage. Passengers have had to get used to paying for amenities including food and extra legroom as airlines force them to pick between the lowest price or other conveniences.

“JetBlue is very mindful of the perception of this being a good value for the money,” said Savanthi Syth, an analyst with Raymond James Financial. “My guess is there isn’t going to be a big consumer backlash.”

The bag charge is $20 if paid during booking and $25 at the airport. If half of JetBlue passengers pay the fee, it may add 50 cents a share to annual earnings, according to Helane Becker, a Cowen & Co. analyst.

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JetBlue is ending the complimentary luggage policy after investors pressured it to improve returns. The company expects the new system to provide at least $200 million in annual operating income by 2017.

The new scale offers fare levels dubbed “Blue,” “Blue Plus” and “Blue Flex.” Frugal travelers who select Blue, the lowest price, must pay to check a bag, while Blue Plus provides one checked bag at no cost and Blue Flex, two bags. Fees for changing or canceling a reservation differ by category.

While pricing will vary, Blue Plus fares will be about $15 higher than Blue, and Blue Flex about $85 higher than Blue Plus, the airline said.

“We’re only doing this after an immense amount of research,” Marty St. George, executive vice president of commercial and planning, said in an interview. “We are not taking this lightly. I think once customers experience it, we’ll be in great shape.”

The new pricing system doesn’t affect passengers who already have booked tickets. The airline also offers a Mint premium product available on a limited number of cross-country routes.

JetBlue also plans to increase revenue by packing planes fuller. Starting later this year as many as 130 of its Airbus Group SE A320 jets will be retrofitted with so-called slimline seats, letting the airline accommodate as many as 15 more people on planes that now carry 150.